Business & Human Rights in Pakistanhttps://businesshumanrightspakistan.wordpress.com
A non - partisan source on buiness and human rights in PakistanFri, 18 Aug 2017 02:54:03 +0000enhourly1http://wordpress.com/https://s2.wp.com/i/buttonw-com.pngBusiness & Human Rights in Pakistanhttps://businesshumanrightspakistan.wordpress.com
Civil Society Response to the Addis Ababa Action Agenda on Financing for Development Addis Ababa, 16 July 2015https://businesshumanrightspakistan.wordpress.com/2015/07/25/civil-society-response-to-the-addis-ababa-action-agenda-on-financing-for-development-addis-ababa-16-july-2015/
https://businesshumanrightspakistan.wordpress.com/2015/07/25/civil-society-response-to-the-addis-ababa-action-agenda-on-financing-for-development-addis-ababa-16-july-2015/#respondSat, 25 Jul 2015 04:45:16 +0000http://businesshumanrightspakistan.wordpress.com/?p=113]]>Very limited changes have happened in the text relating to sustainable development and sustainable development goals. Here, below I discussed the response of civil society to the Addis Ababa Action Agenda (AAAA). My criticism of that text stands. A huge opportunity was lost to identify the realistically that what would be the costing needed for the SDGs and the financial packages that could help in their implementation. There was no date for the time all Stock Exchanges should have as a listing requirement the production of their Environmental, Social and Governance (ESG).

The whole conference is happening of course against the backdrop of the Greece financial crisis.

We are sleep walking towards another financial crisis and this time it will be worse than the last time as governments do not have the bail out money.

Civil Society Response to the Addis Ababa Action Agenda on Financing for Development Addis Ababa

We, members of hundreds of civil society organizations and networks from around the world engaged in the Third FfD Conference, would like to express our concerns and reservations on the Addis Ababa Action Agenda, based on both our ongoing contributions to the process and the deliberations of the CSO FfD Forum (Addis Ababa, 10-12 July 2015).

The Addis Ababa Action Agenda (AAAA) lost the opportunity to tackle the structural injustices in the current global economic system and ensure that development finance is people-centred and protects the environment. It does not rise to world’s current multiple challenges, nor does it contain the necessary leadership, ambition and practical actions. It undermines agreements in the Monterrey Consensus and the Doha Declaration and it is almost entirely devoid of actionable deliverables.

We regret that the negotiations have diminished the FfD mandate to address international systemic issues in macroeconomic, financial, trade, tax, and monetary policies, while also failing to scale up existing resources and commit new financial ones. The AAAA is also deeply inadequate to support the operational Means of Implementation (MoI) for the Post-2015 Development Agenda, exposing an unbridged gap between the rhetoric of the aspirations and reality of the actions.

Against this background, we will continue to be as engaged as ever to uphold the ambitions for economic, monetary and financial frameworks that respond to the imperatives of human rights and the values of humanity and solidarity. We will continue to promote the vision of an economy at the service of the people and the planet, and advocate for the democratization of economic governance and the reaffirmation of the centrality of the United Nations against the governance clubs of the powerful.

We expect that the Addis Agenda’s establishment of an intergovernmental and universal Forum on FfD will provide the political space to advance the global normative agenda in this direction. While the Addis Ababa CSO FfD Forum Declaration addresses the full scope of our concerns, we wish to highlight the following critical issues:

Misplaced optimism towards private finance: We caution that the AAAA’s optimism towards private finance to deliver a broad sustainable development agenda is misplaced. The AAAA fails to endorse binding commitments to ensure business accountability based on internationally recognized human and labor rights as well as environmental standards. There is a growing body of evidence that substantiates civil society’s serious concern for the unconditional support for PPPs and blended financing instruments. Without a parallel recognition of the developmental role of the State and clear safeguards to its ability to regulate in the public interest, there is a great risk that the private sector undermines rather than supports sustainable development.

International tax policy remains the domain of the powerful: The Action Agenda fails to establish an intergovernmental, transparent, accountable, adequately resourced tax body with universal membership that could lead global deliberations on international tax cooperation, stop illicit financial flows and tackle corporate tax dodging, reasserting the current undemocratic and profoundly unfair status quo.

No concrete commitments to ensure tax justice and equity: Regressive tax policies such as indirect taxes disproportionately harm people living in poverty, women, minorities, persons with disabilities, children, and other marginalized groups. Concrete commitments to implement integrated social protection systems, including floors, remain vague and the AAAA fails to reaffirm the need for the implementation of the relevant ILO Conventions and Recommendations.

No strong commitment in terms of transparency and accountability: We believe that the positive and consistent references to the importance of transparency and accountability in the follow-up of the Addis Agenda are not adequately matched by concrete commitments from governments and all actors to publish timely, comprehensive, accessible and forward-looking information about all development activities and resource flows.

Tendency by traditional donors to elude responsibilities and effectiveness commitments: We note with great concern the tendency of traditional donors to elude their responsibilities by putting emphasis on South–South cooperation, Domestic Resource Mobilization or the Private Sector. International Development Cooperation remain critical for development financing and fulfilling the 0.7% commitment made more than four decades ago remains pivotal. Furthermore, the Addis Agenda does not unambiguously address the necessary additionality of climate and biodiversity finance.

No critical assessment of trade regimes: Instead of safeguarding policy space, the Addis Agenda fails to critically assess international trade policy in order to provide alternative paths to commodity-dependence, eliminate investor-state dispute settlement clauses, and undertake human rights impact and sustainability assessments of all trade agreements to ensure their alignment with the national and extraterritorial obligations of governments.

Limited progress on technology: We welcome the establishment of a Technology Facilitation Mechanism (TFM) under the UN. We recognize its potentials to address systemic issues in technology transfer, to enable developing countries to harness their innovation capacities, and to assess the potential impacts of technologies with direct participation of communities and civil society. Technology is not a panacea to development challenges, nor is it gender-neutral. Indigenous and traditional knowledge must be strongly recognized and promoted, and community innovations must be supported on par with those in the formal sector.

Recent UN normative developments on debt ignored: The AAAA ignores the important normative developments in the direction of improving sovereign debt restructuring and establishing guidelines for responsible borrowing and lending that have taken place in the UN over the last few years. It also fails to stop debt sustainability calculations as being the “purely technical” exercise that the Bretton Woods Institutions claim it to be, and embed the moral and legal dimensions that their impacts on human rights call for.

Weakening of UN mandate to address systemic issues: The Addis Agenda fails to provide sufficient political leadership to strengthen the role of the United Nations to lead the necessary human rights-based, pro-development reforms of global economic and financial systems and institutionalize greater coherence. Instead of the profound reflection on the IMF’s failures pre and post-crisis and its unwarranted austerity advice as a response, the Addis Agenda calls for strengthening it and validates the insufficient governance reform process going on. There is no call for reform of the Special Drawing Rights regime towards its full potential to serve as a development finance tool and as the center of the international monetary system. Capital controls are barely acknowledged. Furthermore, the framework does not recognize the need of systemic change that prevents us from remaining within planetary boundaries and lacks specific reference to the need to take into account the environmental dimensions while allocating risk.

]]>https://businesshumanrightspakistan.wordpress.com/2015/07/25/civil-society-response-to-the-addis-ababa-action-agenda-on-financing-for-development-addis-ababa-16-july-2015/feed/0images financejaffry05Common Tax Avoidance Strategies for Multinationalshttps://businesshumanrightspakistan.wordpress.com/2015/06/28/common-tax-avoidance-strategies-for-multinationals/
https://businesshumanrightspakistan.wordpress.com/2015/06/28/common-tax-avoidance-strategies-for-multinationals/#respondSun, 28 Jun 2015 03:14:31 +0000http://businesshumanrightspakistan.wordpress.com/?p=101]]>“Companies have an important role to play in societies across the world and one of those contributions is tax payments which are vital; it enables governments to provide infrastructure, education to workforces of the future, and pay for essential services.”

Katharine Teague, Senior Private Sector Adviser, Christian Aid

There is need to know that how multinationals are practicing/ employing tax avoidance strategies to reduce government revenues. Snapshot of those strategies with cross border examples are following;

Transfer Pricing (Royalties and Service Fees):

A Multinational will locate supplies, intellectual property and high-value
operations in low-tax jurisdictions like Ireland or Switzerland. Then will then charge inflated royalty and/ or service fees to a subsidiary, which reduces taxable income in the subsidiary country and inflates profit in the low-tax jurisdiction (which is subsequently taxed at a much lower rate). This strategy is supported by a bilateral double tax avoidance treaty between the low-tax jurisdiction and the subsidiary country, which may negate local withholding taxes on management fees, for example. Negotiated Incentives: Company or industry specific tax incentives and capital allowances that are often negotiated by a MNC with the government or development agency. Such incentives are provided to encourage investment and expansion by MNCs. Since 2008, Zambia Sugar (an Associated British Foods subsidiary) has
been subject to a 15% corporate tax rate instead of the regular 35% rate because Zambia agreed to recognize its income as “farming income,” a provision typically allowed only for domestic farmers. The company received
a second tax incentive in 2012 that reduced the tax rate on income generated from expanded operations.

Intra-Group Financing:

Multinational often provide intra-company loans to subsidiaries. The interest paid on these loans reduces taxable income for the subsidiary. In some cases, a MNC will charge inflated royalty, management or other fees to an emerging market subsidiary, which reduces the subsidiary’s taxable income. The MNC will then provide a loan at a rate that may even exceed market rates. The interest paid on this loan further reduces taxable income in the emerging market and inflates income earned in the country where the loan originated.
Starbuck’s provided its UK subsidiary with a 2011 loan at Libor plus 4%, while Starbucks group bonds carry a coupon of Libor plus 1.3%. SABMiller’s wholly owned Mauritius subsidiary, Mubex, serves as a supplier to SABMiller’s Ghanaian subsidiary, Accra Brewery. Upon sourcing from Mubex, Accra Brewery’s gross profit declined dramatically. At the same time, Accra Brewery received a GBP 8.5 million loan that provides a GBP 76,000 annual tax shield. The Ghanaian corporate tax rate is 25%, while MNCs in Mauritius are taxed at 3%.

Treaty Shopping:

An umbrella term that refers to the routing of international payments through a third jurisdiction to exploit unique tax benefits. For example, when a MNC obtains a loan for its operations in an emerging market, it can route the loan through a country that has a tax treaty with the emerging market country to avoid local withholding taxes on interest payments. Bilateral tax treaties can also be exploited to reduce or eliminate taxes on dividends paid by the emerging market subsidiary to the parent. Both systems have been
used by Zambia Sugar. The prevalence of routing international payments through tax havens is reflected in OECD statistics on foreign direct investment (FDI). For example, in 2010, Barbados, Bermuda and the British Virgin Islands received more FDI (5.11% of global FDI) than Japan (3.76). That same year, the British Virgin Islands alone were the second largest investor in China (14% FDI), ahead of even the United States (4% FDI).

These tax strategies minimise a company’s corporate tax burden, but they also undermine national development by eroding a country’s tax base, an issue that should be of particular concern for companies and investors with an economic interest in the growth of any country. Indeed, in developing countries like when government face scarcity of funds then they shift the burden on consumers through indirect taxation which ultimately makes hindrance to the growth of middle class and push the lower middle class to wards poverty line. Preventing aggressive corporate tax practices and mitigating the related risks will require action on the part of governments, regulators and companies themselves.

]]>https://businesshumanrightspakistan.wordpress.com/2015/06/28/common-tax-avoidance-strategies-for-multinationals/feed/0imagesjaffry05Pakistan acts to corner tax dodgers, only $8 billion income tax revenue collected in the 2013-14 fiscal yearhttps://businesshumanrightspakistan.wordpress.com/2015/03/24/pakistan-acts-to-corner-tax-dodgers-only-8-billion-income-tax-revenue-collected-in-the-2013-14-fiscal-year-2/
https://businesshumanrightspakistan.wordpress.com/2015/03/24/pakistan-acts-to-corner-tax-dodgers-only-8-billion-income-tax-revenue-collected-in-the-2013-14-fiscal-year-2/#respondTue, 24 Mar 2015 00:20:03 +0000http://businesshumanrightspakistan.wordpress.com/?p=99]]>Pakistan’s tax to GDP ratio at 9.5 percent is among the lowest in the world and the government is under pressure from foreign donors and lenders, including IMF, to increase collection to boost the struggling economy. Revenue authorities say they have identified about a quarter of a million new taxpayers who they project will add around Rs 14 billion ($140 million) to government coffers.
Broadening the tax base and improving the economy after years of lethargic growth under the last government was a key pledge in Prime Minister Nawaz Sharifs 2013 election campaign, when he was swept to power for a third term.
Currently less than one percent of Pakistani pay income tax and the government collected just $8 billion in total income tax in the 2013- 14 fiscal year – barely enough to cover just the country’s defense expenditure of $7 billion.
The strategy aimed by the Ministry of Finance on issuance notices to 261,250 potential tax payers and the intelligence was gathered through vehicle registration authority, car manufactures, utility companies, telecom companies an property registration offices.
Pakistan is a country where wealth and political influence go hand in hand. For generations, landowners and industrialists have given patronage to political parties and scant attention has been paid to their assets by the tax man. Huge shortfall in revenues due to exemptions through statutory regulatory orders (SROs) and otherwise given by parliament jeopardize projection of revenue collection and fiscal deficit every year (Federal Budget FY 15: Tale of fiscal stabilization, Muhammed Sabir, Business Recorder, September 17, 2014 and Federal Board of Revenue (FBR): tax collection Performance, Huzaima Bukhari and Dr. Ikramul Haq, Business Recorder March, 2015)
FBR has been persistently failing to meet budgetary targets for the last many years contrary to real potential is Rs. 7 trillion (FBR, New Chairman, old challenges, Business recorder August 2, 2013). Due to the poor performance in revenue collection, provinces which are wholly dependent on federally divisible pool – which is very meager and have not adequate space to spend on welfare of the people or on essential services. Furthermore, this is a vital role of taxes to spend on essential services, which we call it redistribution of wealth, whose create harmony and equalize the society. On the other side, provinces are not ready to collect their own taxes because of landlord elite capture of the system. If we look at the anomalies of political system, this is local government mandate to generate their own resources (under article 140 A of the constitution, this elite capture makes the whole system in their own hand.
In contradict to earlier FBR aimed strategy to issuance of notice of quarter of the million people, National Database and Registration Authority (NADRA) there are three million people who even do not have National Tax Numbers (NTNs), lives in very aristocratic places, have multiple bank accounts, vast majority of government servants, elected legislators, even judges and generals are out of tax nets. Since 2009, on average 7 % decline in income tax returns filers (Federal Board of Revenue (FBR): tax collection Performance, Huzaima Bukhari and Dr. Ikramul Haq, Business Recorder March, 2015). Furthermore, sales tax regime, 100,000 registered tax payers, out of which less than 30,000 pay any tax. FBR out of 2.5 million retailors; it has managed to register only 8,000 outlets. (Ibid)
“About 40 million out of 170 million people in Pakistan have now succeeded in keeping their living standards from falling, (Shahid Javed Burki, ‘Provincial Rights and Responsibilities’, Journal of Economics, September 2010). Indeed, about 15 Million people improved their economic status even in this slow-moving economy. And FBR isn’t put any effort to tap this resource and tax them. According to Household Integrated Economic Survey (HIES) 2011-12 conducted by Pakistan Bureau of Statistics, 5 million individuals have annual taxable income of Rs. 1.5 million. And FBR just tap this potential then estimated tax collection on the prevalent rate would be Rs. 1650 billion. On similar line, if corporate entities at prevalent rate and already registered then it would be Rs. 4500 billion. On contrast situation is very bleak at this time, FBR only generating Rs. 880 billion. Another joint study conducted by Andrew Young school of Policy Studies at Georgia State University and World Bank, indicates that FBR actual collection is not more than 50 percent of potential – due to leakages in sales tax, federal excise duty and custom duties.
By concluding, there is need of take such courageous measures i.e. to stop massive tax evasion in custom, sales tax and income tax implement the integrated the automated tax intelligence system which have ability to record, store and cross check all the input and out information, and independent National Tax Collection agency which will be free from political pressures. Indeed, it will be run by the independent Board of Directors selected by National Finance Commission or Council of Common Interests. ]]>https://businesshumanrightspakistan.wordpress.com/2015/03/24/pakistan-acts-to-corner-tax-dodgers-only-8-billion-income-tax-revenue-collected-in-the-2013-14-fiscal-year-2/feed/0Tax forms USjaffry05Pakistan acts to corner tax dodgers, only $8 billion income tax revenue collected in the 2013-14 fiscal yearhttps://businesshumanrightspakistan.wordpress.com/2015/03/24/pakistan-acts-to-corner-tax-dodgers-only-8-billion-income-tax-revenue-collected-in-the-2013-14-fiscal-year/
https://businesshumanrightspakistan.wordpress.com/2015/03/24/pakistan-acts-to-corner-tax-dodgers-only-8-billion-income-tax-revenue-collected-in-the-2013-14-fiscal-year/#respondTue, 24 Mar 2015 00:11:51 +0000http://businesshumanrightspakistan.wordpress.com/?p=94]]>Pakistan’s tax to GDP ratio at 9.5 percent is among the lowest in the world and the government is under pressure from foreign donors and lenders, including IMF, to increase collection to boost the struggling economy. Revenue authorities say they have identified about a quarter of a million new taxpayers who they project will add around Rs 14 billion ($140 million) to government coffers.

Broadening the tax base and improving the economy after years of lethargic growth under the last government was a key pledge in Prime Minister Nawaz Sharifs 2013 election campaign, when he was swept to power for a third term.

Currently less than one percent of Pakistani pay income tax and the government collected just $8 billion in total income tax in the 2013- 14 fiscal year – barely enough to cover just the country’s defense expenditure of $7 billion.

The strategy aimed by the Ministry of Finance on issuance notices to 261,250 potential tax payers and the intelligence was gathered through vehicle registration authority, car manufactures, utility companies, telecom companies an property registration offices.

Pakistan is a country where wealth and political influence go hand in hand. For generations, landowners and industrialists have given patronage to political parties and scant attention has been paid to their assets by the tax man. Huge shortfall in revenues due to exemptions through statutory regulatory orders (SROs) and otherwise given by parliament jeopardize projection of revenue collection and fiscal deficit every year (Federal Budget FY 15: Tale of fiscal stabilization, Muhammed Sabir, Business Recorder, September 17, 2014 and Federal Board of Revenue (FBR): tax collection Performance, Huzaima Bukhari and Dr. Ikramul Haq, Business Recorder March, 2015)
FBR has been persistently failing to meet budgetary targets for the last many years contrary to real potential is Rs. 7 trillion (FBR, New Chairman, old challenges, Business recorder August 2, 2013). Due to the poor performance in revenue collection, provinces which are wholly dependent on federally divisible pool – which is very meager and have not adequate space to spend on welfare of the people or on essential services. Furthermore, this is a vital role of taxes to spend on essential services, which we call it redistribution of wealth, whose create harmony and equalize the society. On the other side, provinces are not ready to collect their own taxes because of landlord elite capture of the system. If we look at the anomalies of political system, this is local government mandate to generate their own resources (under article 140 A of the constitution, this elite capture makes the whole system in their own hand.

In contradict to earlier FBR aimed strategy to issuance of notice of quarter of the million people, National Database and Registration Authority (NADRA) there are three million people who even do not have National Tax Numbers (NTNs), lives in very aristocratic places, have multiple bank accounts, vast majority of government servants, elected legislators, even judges and generals are out of tax nets. Since 2009, on average 7 % decline in income tax returns filers (Federal Board of Revenue (FBR): tax collection Performance, Huzaima Bukhari and Dr. Ikramul Haq, Business Recorder March, 2015). Furthermore, sales tax regime, 100,000 registered tax payers, out of which less than 30,000 pay any tax. FBR out of 2.5 million retailers; it has managed to register only 8,000 outlets. (Ibid)

“About 40 million out of 170 million people in Pakistan have now succeeded in keeping their living standards from falling, (Shahid Javed Burki, ‘Provincial Rights and Responsibilities’, Journal of Economics, September 2010). Indeed, about 15 Million people improved their economic status even in this slow-moving economy. And FBR isn’t put any effort to tap this resource and tax them. According to Household Integrated Economic Survey (HIES) 2011-12 conducted by Pakistan Bureau of Statistics, 5 million individuals have annual taxable income of Rs. 1.5 million. And FBR just tap this potential then estimated tax collection on the prevalent rate would be Rs. 1650 billion. On similar line, if corporate entities at prevalent rate and already registered then it would be Rs. 4500 billion. On contrast situation is very bleak at this time, FBR only generating Rs. 880 billion. Another joint study conducted by Andrew Young school of Policy Studies at Georgia State University and World Bank, indicates that FBR actual collection is not more than 50 percent of potential – due to leakages in sales tax, federal excise duty and custom duties.

By concluding, there is need of take such courageous measures i.e. to stop massive tax evasion in custom, sales tax and income tax implement the integrated the automated tax intelligence system which have ability to record, store and cross check all the input and out information, and independent National Tax Collection agency which will be free from political pressures. Indeed, it will be run by the independent Board of Directors selected by National Finance Commission or Council of Common Interests.

MNCs increase a government’s reliance on value-added taxes or GST (VATs, which are viewed by many as regressive) and reduce government tax receipts that can be used to fund education, expand health care, combat poverty, invest in infrastructure, and otherwise contribute to the nation’s economic development.
Pakistan government gave tax incentives, pro rich tax exemptions alone reduced tax collected by an amount equivalent to 23% of total government revenue, PKR 600 billion and in a last decade the amount was calculated 1500 billion according to one of Oxfam study “ Abolish the pro rich tax exemptions for right to life”. Yet these concessions account for only a portion of lost potential revenue. The use of inflated transfer pricing arrangements and royalty and management fees further reduce government tax receipts. Which needs to further investigates how much the quantum of state revenues lost due to tax avoidance practices.

“Companies have an important role to play in societies across the world and one of those contributions is tax payments which are vital; it enables governments to provide infrastructure, education to workforces of the future, and pay for essential services.” Katharine Teague, Senior Private Sector Adviser, Christian Aid

Corporate tax policy, a previously mysterious topic, has crept into the mainstream as austerity efforts across Europe are seen in the context of record corporate profits and falling corporate tax receipts. Increased public interest has raised the reputational risks associated with corporate tax avoidance and spurred politicians and government leaders in Europe and the United States to begin pushing for corporations to “pay their fair share.” however, in developing countries this case is not taking at the agenda because of wrong perception that country like Pakistan might lost the FDI of MNCs. In fact the potential revenues lost undermining the state responsibility to protect the human rights and in case of the companies – infringement of human rights by not compliance the respecting the human rights.

In emerging markets like Pakistan, MNCs often negotiate tax concessions with the national government, utilise special economic zones (SEZs) and adopt royalty and fee structures that result in tax payments incommensurate with a company’s operational activity. These tax strategies minimise a company’s corporate tax burden, but they also undermine national development by eroding a country’s tax base, an issue that should be of particular concern for companies and investors with an economic interest in the growth of an emerging market consumer class. Preventing aggressive corporate tax practices and mitigating the related risks will require action on the part of governments, regulators and companies themselves.

In perspective of MNCs, this tax avoidance is not a win win situation, actually it is a completely lose game. How it works, the following arguments provide business case for MNCs;

• Tax avoidance strategies have become more common and aggressive. Aggressive tax positions concerning inflated royalty and management fee structures, transfer pricing arrangements, intra-company loans and the location of intangible assets and high-value business functions pose material reputational, operational and financial risks to MNCs.
• Austerity measures and reduced tax receipts have increased public and government scrutiny in both developed and emerging markets, while high-profile media campaigns have exposed the tax avoidance strategies of MNCs like Apple, Starbucks and Google, eroding brand value and leading to multiple protests and boycotts.
• For consumer MNCs operating in emerging markets, tax avoidance strategies pose medium- to long-term risks to profitability by increasing the risk of tax-related penalties, damaging relationships with local governments and eroding the corporate tax base that accounts for a significant portion of the potential and actual government tax revenue necessary for economic development and the growth of a consumer class.
• In emerging markets, the reputational risks can be particularly severe as large MNCs are frequently targeted by protest groups when they are not seen as a being good corporate citizens.

The global debate is shifting and as regulators look to crack down on corporate tax avoidance, it is in companies’ best interests to proactively adopt responsible tax practices. First and foremost, MNCs should not locate group companies in tax havens unless there is a justification based on legitimate economic activity. Corporate tax transparency remains inadequate which prevents investors from accurately assessing the risk of corporate tax positions. Steps to improve transparency include a formal tax policy and code of conduct as well as a country-by-country breakdown of revenue and taxes paid.

Here is a glimpse of some tax avoidance practices, how corporate use as tax planning:

Common Tax Avoidance Strategies for MNCs

Transfer Pricing (Royalties and Service Fees): A MNC will locate supplies, intellectual property and high-value operations in low-tax jurisdictions like Ireland or Switzerland. The MNC will then charge inflated royalty and/or service fees to a subsidiary, which reduces taxable income in the subsidiary country and inflates profit in the low-tax jurisdiction (which is subsequently taxed at a much lower rate). This strategy is supported by a bilateral double tax avoidance treaty between the low-tax jurisdiction and the subsidiary country, which may negate local withholding taxes on management fees, for example.

Negotiated Incentives: Company or industry specific tax incentives and capital allowances that are often negotiated by a MNC with the government or development agency. Such incentives are provided to encourage investment and expansion by MNCs. Since 2008, Zambia Sugar (an Associated British Foods subsidiary) has been subject to a 15% corporate tax rate instead of the regular 35% rate because Zambia agreed to recognize its income as “farming income,” a provision typically allowed only for domestic farmers. The company received a second tax incentive in 2012 that reduced the tax rate on income generated from expanded operations. In Pakistan many sectors got such deals especially fertilizer, auto, IT software and textile sectors etc. And ironically, big business men turned politician made regulatory regimes in their vested interests which translate into Pakistan as tax havens.

Intra-Group Financing: MNCs often provide intra-company loans to subsidiaries. The interest paid on these loans reduces taxable income for the subsidiary. In some cases, a MNC will charge inflated royalty, management or other fees to an emerging market subsidiary, which reduces the subsidiary’s taxable income. The MNC will then provide a loan at a rate that may even exceed market rates. The interest paid on this loan further reduces taxable income in the emerging market and inflates income earned in the country where the loan originated. Starbuck’s provided its UK subsidiary with a 2011 loan at Libor plus 4%, while Starbucks group bonds carry a coupon of Libor plus 1.3%. SABMiller’s wholly owned Mauritius subsidiary, Mubex, serves as a supplier to SABMiller’s Ghanaian subsidiary, Accra Brewery. Upon sourcing from Mubex, Accra Brewery’s gross profit declined dramatically. At the same time, Accra Brewery received a GBP 8.5 million loan that provides a GBP 76,000 annual tax shield. The Ghanaian corporate tax rate is 25%, while MNCs in Mauritius are taxed at 3%.

Treaty Shopping: An umbrella term that refers to the routing of international payments through a third jurisdiction to exploit unique tax benefits. For example, when a MNC obtains a loan for its operations in an emerging market, it can route the loan through a country that has a tax treaty with the emerging market country to avoid local withholding taxes on interest payments. Bilateral tax treaties can also be exploited to reduce or eliminate taxes on dividends paid by the emerging market subsidiary to the parent. The prevalence of routing international payments through tax havens is reflected in OECD statistics on foreign direct investment (FDI). For example, in 2010, Barbados, Bermuda and the British Virgin Islands received more FDI (5.11% of global FDI) than Japan (3.76). That same year, the British Virgin Islands alone were the second largest investor in China (14% FDI), ahead of even the United States (4% FDI).

Humans are social beings, and the kind of creature that a person becomes depends crucially on the social, cultural and institutional circumstances of his life. We are therefore led to inquire into the social arrangements that are conducive to people’s rights and welfare, and to fulfilling their just aspirations — in brief, the common good.

Concern for the common good should impel us to find ways to cultivate human development in its richest diversity. Therefore, in business contemporary world Human Rights nexus are on three pillars i.e. state duty to protect human rights against violations by businesses, businesses has to respect human rights and third remedy against the violations.

Below the general outline areas which indicate the broader policy framework to design and develop business and human rights national plans.

General Regulatory and Policy Functions

1. Regulatory Tools and Challenges:What measures, both preventive and remedial, can States take to address human rights abuses by businesses, especially transnational corporations? (Successful case studies, best practices of state protection). What are the challenges faced by States in this regard?

2. Trans-national Business: What is the State’s responsibility in ensuring observance of human rights by its Transnational Companies (TNCs) in another country, especially if the other country is not party to certain international treaties (or if it doesn’t regulate against that particular human rights violation)? What efforts can it undertake to prevent human rights violations by its TNCs?

3. Supply Chains:What kind of support (both legal and non-legal) could States provide to companies to encourage responsible supply chain management?

State-Business Nexus

4. When contracting out State Functions, how can States ensure that private firms will respect human rights? What (internationally accepted) training/certification do private contractors need to undergo? What is the collaboration required between states and private security companies at the local, regional and international levels?

Policy Coherence and Regional and International Cooperation

5. When there is no region – wide enforcement or regulation of company fair practices, how can states improve human rights protection from corporate violation at the regional level.

6. What strategies can be utilized to ensure that states are able to adhere and flow the international labour standards to which they have subscribed?

7. What kind of cooperation is needed between states to ensure that economic production does not infringe upon the human rights of populations in host and home countries?

8. How can states best utilize existing for a such as such the Universal Periodic Review to learn and apply in their own domestic protection duties?

9. Due to the nature of Special Economic Zones (SEZs) and their exemption from some federal laws, how do governments improve human rights observance while still maintaining SEZs purpose and effectiveness?

]]>https://businesshumanrightspakistan.wordpress.com/2014/12/14/state-duty-to-protect-human-rights-against-violations-by-businesses/feed/0indexjaffry05images1How Corporate Sustainability can work for reducing inequality at largehttps://businesshumanrightspakistan.wordpress.com/2014/09/09/how-corporate-sustainability-can-work-for-reducing-inequality-at-large/
https://businesshumanrightspakistan.wordpress.com/2014/09/09/how-corporate-sustainability-can-work-for-reducing-inequality-at-large/#respondTue, 09 Sep 2014 15:09:09 +0000http://businesshumanrightspakistan.wordpress.com/?p=84]]>At the face of miserable state of global health, women’s empowerment, and basic education have come up against headlines about the West African Ebola outbreak, kidnapping and harassment of girls trying to go to school – these are outcomes of inequality and injustice. The situation across the world same in some measures, for instance developed nations living is in more unequal than much of the so – called “developing world” – the city of San Francisco now has a higher inequality ratio than the country of Rwanda.

Today’s issues can be well-defined in three main ways: the disappearance of the middle class in mature markets; ongoing and extreme poverty in developing markets; and a lack of adequate education, training, and compensation for workers. These problems deteriorate growth, increase vulnerability to economic shocks, and inflate human capital inefficiencies i.e. employee productivity. That’s obviously bad for business, and corporate leaders know this.

Given the scale and complexity of the challenges, how can we evolve corporate sustainability to more effectively respond, and to proactively promote an inclusive global economy? In response to inclusive economy – it looks like on the following themes:

Any contributions a company can make to society require a foundational respect for human rights. Companies must make an effort to protect the rights of those directly and indirectly employed or otherwise affected by that company. The UN Guiding Principles on Business and Human Rights introduced a framework for compliance, but have they made a difference?, need to follow proactively.

Job creation is an essential pillar of an inclusive economy. But as the ILO’s Decent Work Agenda tells us, not all jobs are good jobs. So there is a need to explore venues that how companies can ensure they are creating and sustaining good jobs in both mature and emerging markets.

Engaged, prosperous communities help break the cycle of poverty and underpin business success. Companies have developed sophisticated community engagement strategies to drive socioeconomic development. There is a need to work out and explores best practices, challenges, and innovations to replicate across the world.

Significant opportunities exist for business to contribute to the fight against poverty. The introduction of the new Sustainable Development Goals in 2015 will offer up a unique moment for partnership among business, government, and civil society. To contribute to this dialogue, there is a need to explore potential roles for the business community, industry sectors, and individual companies to support poverty alleviation, access to health, gender equality, rule of law, and environmental sustainability. Indeed, work out collectively how equitable and progressive taxation system make world more equal.

Approach to corporate responsibility must evolve to respond to sustained and growing inequalities. Corporations coexist with society and depend on its stability, progress, and prosperity. Now there is strong demand to look into new evolving definitions of the responsibility of business to society, and it will reflect in to pursue in purpose-driven profit.

Inclusive economic growth and development offer noteworthy profits for business, as well as broader society. Businesses that craft and act upon a strategy to build an inclusive economy will contribute to social and market development, greater customer loyalty, access to talent and innovation, social and economic stability, increased productivity, and improved stakeholder relations.

The fundamental purpose of a company, whether a large corporation or a small business, is to create value. I am hoping CSOs to work with businesses to create more inclusive value, which will profit both society and business.

]]>https://businesshumanrightspakistan.wordpress.com/2014/09/09/how-corporate-sustainability-can-work-for-reducing-inequality-at-large/feed/0Income Gapjaffry0530 Million Tons of lost crop each year: A big concern for survival of human agehttps://businesshumanrightspakistan.wordpress.com/2014/06/28/30-million-tons-of-lost-crop-each-year-a-big-concern-for-survival-of-human-age/
https://businesshumanrightspakistan.wordpress.com/2014/06/28/30-million-tons-of-lost-crop-each-year-a-big-concern-for-survival-of-human-age/#respondSat, 28 Jun 2014 06:03:47 +0000http://businesshumanrightspakistan.wordpress.com/?p=80]]>According to the World Health Organization, air pollution triggered 7 million premature deaths in 2012 and is responsible for more than 30 million tons of lost crops each year. Indeed, the debate around climate change i.e. reducing carbon emissions, methane, and other so-called “short-lived climate pollutants”—including black carbon, tropospheric ozone, and high-global-warming-potential hydrofluorocarbons—remain in the atmosphere anywhere from a few weeks to a few years but produce outsized harm.

Part of the challenge in reducing these pollutants is that multiple industries—including transportation, solid waste disposal, agriculture, refrigeration, and brick production—contribute to them. Progress, therefore, depends on collective action. Much is already being done. Companies are finding ways to work with governments and NGOs in various topic-specific forums and coalitions, where everyone sets aside differences to work on the common ground of environmental sustainability.

As just one example, Coca-Cola, Unilever, and other companies have formed Refrigerants, Naturally! to shift cooling technology in the food, beverage, and retail sectors toward more climate-friendly alternatives to hazardous hydrofluorocarbons. Refrigerants, Naturally! is an organization of companies, and it is publicly supported by the UN Environment Programme and Greenpeace.

And that is the point: Activist groups and companies that are sometimes at odds over these issues are finding ways to work together because they all have the same goal: to keep the Earth and its air, water, and other resources clean and plentiful.

It sounds simple—find the common ground and work together—but of course, it’s not. At the Climate and Clean Air Coalition (CCAC), where we work together to address SLCPs, we’ve learned a few ways to build collective action. They include:

Ensuring senior leadership engagement, or, in the vernacular of governments and international organizations, “high-level involvement.” At this level, roadblocks can be dismantled quickly.

Establishing a culture of less talk, more action, through approaches that include trackable goals and comprehensive stakeholder involvement. One environmental minister in our coalition dubbed us the “Coalition of the Working.”

Now there is a need to pay attention by doing action, it is a simple preposition for survival.

]]>https://businesshumanrightspakistan.wordpress.com/2014/06/28/30-million-tons-of-lost-crop-each-year-a-big-concern-for-survival-of-human-age/feed/0Crop wastejaffry05What Is the Responsibility of Corporate Sponsors? The Sochi Games and Human Rightshttps://businesshumanrightspakistan.wordpress.com/2014/02/09/what-is-the-responsibility-of-corporate-sponsors-the-sochi-games-and-human-rights/
https://businesshumanrightspakistan.wordpress.com/2014/02/09/what-is-the-responsibility-of-corporate-sponsors-the-sochi-games-and-human-rights/#respondSun, 09 Feb 2014 04:42:55 +0000http://businesshumanrightspakistan.wordpress.com/?p=68]]>The role of corporate sponsors is under scrutiny— as the Winter Olympic Games about to kick off in Sochi. The international community—companies included— here we should seek evidence that they are addressing the risks to human rights in their own operations. Indeed, Major sporting events present a potential advantage to the local economy and national pride. However, the costs of such events are often shouldered by the country’s—and the world’s—most vulnerable people.

Companies that provide uniforms, equipment, and branded merchandise should have full visibility of their supply chains. Particularly with goods produced for a one-time event, where there might not be an extended relationship with a supplier, it might be tempting to ignore working conditions in favor of just getting this one order through. Brands have been called out in the past for how and where they’ve sourced Olympic uniforms, and following the Rana Plaza tragedy, public scrutiny continues to rise.

Human Rights Watch has cataloged human rights abuses leading up to the Sochi Games, including the exploitation of migrant workers in the construction of related facilities. Companies involved in infrastructure development should follow the Dhaka Principles for Migration with Dignity. For example, they should make sure that wages are paid on time and in full, and that no passports or identity documents are retained.

Human rights campaigners are right to seek every possible lever to pressure difficult governments. But we should all be watching the corporate sponsors and partners of major sporting events for not just what they say, but what they do.

]]>https://businesshumanrightspakistan.wordpress.com/2014/02/09/what-is-the-responsibility-of-corporate-sponsors-the-sochi-games-and-human-rights/feed/0Sochijaffry05Prospects from Business world in 2014https://businesshumanrightspakistan.wordpress.com/2014/01/23/prospects-from-business-world-in-2014/
https://businesshumanrightspakistan.wordpress.com/2014/01/23/prospects-from-business-world-in-2014/#commentsThu, 23 Jan 2014 06:40:41 +0000http://businesshumanrightspakistan.wordpress.com/?p=2]]>Second UN business & human rights forum inspire my planning for the year 2014. What do I want to expose my friends in the New Year? What do I want to learn? How might we grow as individuals and as a family? This January, it occurred to me that the process could also apply to my professional life. That is, what are my prospects from the business world in 2014?

In 2014, I would like to see the private sector commit to three goals:

1. Implementation of carbon-neutral policies, which will require decisions and investments that focus on efficiency and low-carbon and renewable energy, as well as investments in carbon sequestration activities, such as forest carbon projects.
2. Becoming biodiversity and ecosystem services neutral, which will require businesses to stimulate the innovation power within their companies and networks to ensure that they avoid, mitigate, and offset impacts on the ecological systems upon which we all rely.
3. Getting bigger thinking on relationship among business and people, from customers to employees to supply chain partners. This will require a range of actions, including strengthening policies for human rights and labor issues and creating clear, aspirational environmental policies around worker and community well-being, such as a transition away from the use of toxic chemicals.

All three goals are essential to business, human, and environmental sustainability, but the second goal is worth considering in more detail because it is seldom considered at all. This relative lack of attention to natural capital—including biodiversity and the flow of ecosystem services—is weird given that we all breathe oxygen (from plants), eat food (grown in soil), and drink freshwater (which is cycled through natural hydrological systems, not just wastewater treatment plants). Our reliance on natural systems is so fundamental that it is invisible. We assume that it will always be there for us.
To ensure that natural systems will continue to function in the ways that we have come to expect, the corporate pathway toward biodiversity and ecosystem services and biodiversity neutral goals should include:

• Funding sustainability-focused R&D and investment business units that focus on innovation and even the creative destruction of existing products and processes that have adverse impacts on biodiversity and ecosystem services—while still supporting ongoing growth and competitiveness of the company.
• Committing to sustainable materials, design, and products that eliminate the use of toxic, persistent, and bio-accumulative chemicals and materials.
• Exploring offsets, such as forest carbon projects that meet both the Verified Carbon Standard and the Climate, Community, and Biodiversity Alliance.
• Establishing sustainable sourcing goals that intertwine social and environmental considerations, such as products that are both Fair Trade and sustainably harvested.

Indeed, prospecting that at the end of 2014, we could congratulate ourselves on leapfrog actions that have put us on a new (regenerative) path? And make this planet for us with full of life.

]]>https://businesshumanrightspakistan.wordpress.com/2014/01/23/prospects-from-business-world-in-2014/feed/2Business with responsibilityjaffry05